Fed’s Williams: Only taper when sure economy on right track

(This blog post has been updated to reflect the fact that Williams is not a voting member of the FOMC in 2013.)

The Federal Reserve should only taper when it is “completely confident” the economy is on the right track, said John Williams, the president of the San Francisco Federal Reserve Bank, on Tuesday.

Bloomberg

John Williams

In an interview with Reuters, Williams said when the Fed reaches that level of confidence, it should announce an end date and a total purchase total for the program.

The Fed began this third round of asset purchases — $85 billion a month in Treasurys and mortgage-related securities — in September 2012.

In the interview, Williams also said he was concerned that markets are not getting the Fed’s message that interest rates will stay low even after the Fed ends the asset purchase program.

To that end, he said he would support revising the Fed’s guidance on when it would consider the first rate hike.

The Fed said a year ago that it would not consider a rate hike as long as the unemployment rate was above 6.5%.

“My view would be that we would not be raising the funds rate even if the unemployment rate was below 6.5%, as long as inflation continued to be low, for some time,” Williams said.

“I would get our communication around this post-6.5% [phrasing],” he said — “the sooner, the better.”

Williams is scheduled to return to voting membership of the Fed’s policy-making committee in 2015. He is seen as a close ally of Janet Yellen, who is expected to take over for Ben Bernanke as Fed chairman early next year.